Yeongpung and Korea Zinc's 'Tender Offer Prohibition' Second Court Battle... Verdict Expected on the 21st

Yeongpung and Korea Zinc clashed once again in court over Korea Zinc's tender offer for its own shares. The decision on whether to grant or dismiss the injunction is expected as early as the 21st.

On the 18th, the 50th Civil Division of the Seoul Central District Court (Chief Presiding Judge Kim Sang-hoon) held a hearing for the 'injunction to suspend the tender offer process' case filed by Yeongpung against Chairman Choi Yoon-beom of Korea Zinc. Previously, Yeongpung had filed an injunction last month to prohibit Korea Zinc from purchasing its own shares, but after all were dismissed, it filed a second injunction lawsuit earlier this month.

On this day, both parties prepared presentation materials and explained their positions for about 20 minutes each. The key issues in this injunction are whether Chairman Choi's side committed breach of fiduciary duty and whether voluntary reserves should be included in distributable profits.

First, Yeongpung argued that purchasing treasury shares at this point would cause enormous damage to the company. Yeongpung stated, "The current stock price is an abnormal price formed solely due to the specific situation of the management rights dispute and the tender offer," and "the company will suffer a loss of 1.36 trillion won at the end of the purchase period." They emphasized, "If the tender offer proceeds, the defendants may be held liable both civilly and criminally."

Yeongpung also claimed that using Korea Zinc's voluntary reserves for the tender offer without a shareholders' meeting resolution is illegal. They argued that to use voluntary reserves as funds for the tender offer, a resolution of the shareholders' meeting is required for the change of use purpose, not just a board resolution.

On the other hand, Korea Zinc rebutted Yeongpung's breach of fiduciary duty claim, stating that acquiring treasury shares at a high price is not problematic. Korea Zinc pointed out, "It cannot be concluded that the tender offer price of 890,000 won is higher than the actual value of the stock," and "Yeongpung also raised the tender offer price to 830,000 won, but there is no basis to conclude that 830,000 won corresponds to the actual value while 890,000 won does not." They emphasized that "Korea Zinc's financial soundness is very good" and that the tender offer will not adversely affect Korea Zinc's financial condition.

Furthermore, Korea Zinc argued that there is no provision under the Commercial Act requiring voluntary reserves to be deducted from distributable profits. Korea Zinc stated, "There is no articles of incorporation related to voluntary reserves for treasury stock acquisition," and "the treasury shares acquired by the company are accounted for as a separate capital adjustment account (treasury stock) unrelated to voluntary reserves."

The court plans to announce its decision as early as the 21st. The presiding judge stated, "We intend to make a decision that avoids confusion by considering market reactions," and "We will review the records and make every effort to decide by the 21st."